Investing.com -- A narrowing regulatory window before the 2028 presidential election is forcing U.S. bank dealmakers to act within the next 12 months, according to TD Cowen bank analyst Janet Lee, who named 38 potential sellers and four top acquisition targets in a report published Tuesday.

"We see stars aligning for a bank M&A rebound in 2027, as the favorable regulatory window narrows ahead of the '28 presidential election," Lee wrote. The firm's joint analysis, produced with TD Cowen's Washington Research Group and Canadian Banks teams, sets the optimal deal-making window from November 2026 through Q1 2027, with a hard deadline by Q3 2027 — after which political risk rises sharply.

The most direct equity expressions of that thesis sit within TD Cowen's own U.S. Mid- and Small-Cap Banks coverage. The firm names Columbia Banking System (NASDAQ: COLB), Eagle Bancorp (NASDAQ: EBC), First Horizon National (NYSE: FHN), and Flagstar Financial (NYSE: FLG) as potential acquisition targets "based on strategic consideration and/or potential buyer interest," according to the report. Each of those names carries take-out optionality that could reprice quickly if a credible bid surfaces before Q3 2027.

To identify those targets, TD Cowen refreshed its proprietary "Money Making Framework" M&A screen across roughly 100 historical bank transactions, examining what separates successful post-deal performers from laggards. The firm found that stronger acquirers better preserve top-line growth, generate greater operating leverage, and deliver tangible book value growth — criteria that now shape its 38-name seller list.

On the buyer side, TD Cowen points north of the border. Royal Bank of Canada and Bank of Montreal are highlighted as Canadian banks with "greater potential to pursue cross-border transactions," with near-record capital levels and strong deal currency cited as structural tailwinds, according to TD Cowen.

The firm also maps out specific pairings within its domestic coverage. Following conference commentary from M&T Bank (NYSE: MTB) and Regions Financial (NYSE: RF) that Lee characterized as leaving "the door open to M&A," TD Cowen's strategic analysis flags EBC as a potential match for MTB, and First Horizon or Renasant Corp (NASDAQ: RNST) as potential fits for RF.

The urgency stems from politics as much as fundamentals. TD Cowen's Washington Research Group expects Democrats to regain control of both the Senate and the House ahead of the 2028 cycle, a scenario the firm treats as a hard stop on the current permissive regulatory backdrop. "The window for bank M&A is open, but the clock is ticking," Lee wrote.

Seller motivation is also building, the analyst argues. "Potential sellers may be increasingly more willing to evaluate strategic alternatives while fundamentals remain healthy to transact from a position of strength, as standalone upside moderates and much of the earnings normalization from prior years has been realized," Lee said. In other words, mid-size banks that have already worked through post-pandemic credit normalization may find the math on a premium takeout more attractive than waiting for organic upside that TD Cowen views as increasingly limited.

Two catalysts give the thesis its near-term urgency. First, the November 2026 start of TD Cowen's optimal window is less than five weeks away, meaning boards and advisers would need to begin preparatory conversations almost immediately for any deal to clear regulatory review before the Q3 2027 deadline. Second, the anticipated Democratic sweep of Congress, if it materializes on the 2028 election timeline TD Cowen's Washington Research Group projects, would likely usher in a tighter bank merger review regime, effectively closing the current window for large cross-border and in-market combinations. Investors in COLB, EBC, FHN, and FLG will be watching for any strategic commentary at upcoming earnings calls this quarter as the first signal of whether management teams are beginning to warm to that calculus.

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